You got the power** to make superannuation an estate asset?

The decision in Stock (as Executor of the Will of Mandie, Deceased) v N.M. Superannuation Proprietary Limited [2015] FCA 612 is another reminder of the fact that superannuation death benefits are not an estate asset.

Broadly the background was as follows:

1. The member died without making any binding nomination for his superannuation benefits, although binding nominations were permissible.
2. The member had made a non-binding nomination to his wife, however she predeceased him.
3. The trust deed for the fund provided that if there was no binding nomination the trustee retained the discretion to pay a death benefit to the member’s -
1. dependants; or
2. legal personal representative (LPR).
4. The trustee of the super fund resolved to pay the death benefit to the member’s dependants, namely 3 adult children, in equal shares.
5. The LPR challenged the distribution on the basis of comments in the member’s will, including the fact that two of the adult children had entered into a settlement agreement with their father 20 years earlier confirming they would have no entitlement under his estate.
6. Under the member’s will, his estate made provision for grandchildren and the child who was not a party to the settlement the other two children had entered into.

In rejecting the LPR’s challenge it was confirmed that superannuation is not an asset of an estate and a trustee is not bound to follow the directions of a will.

In particular, even if superannuation is specifically mentioned in a will, this does not make it an asset subject to the terms of the will. While a trustee may review a deceased member’s will, it is not the role of a super fund trustee to attempt to resolve issues relating to their estate.

Rather, a trustee must independently determine the distribution of a death benefit, unless there is a valid binding death benefit nomination.

It was also confirmed that in making a determination, a super fund trustee need only show that their decision is fair and reasonable. Any court review of a trustee decision therefore did not need to analyse the trustee’s processes or reasoning.

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** For the trainspotters, the title of today's post is riffed from the Gorillaz song ‘We got the power’.

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